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Public-sector workers should contribute to their own pension

Published:Monday | March 28, 2016 | 3:00 AMHenley Taylor

The issue of the public-sector workers contributing to their own pension has indeed become a moot point. This has taken on increased significance against the background of an International Monetary Fund (IMF) agreement geared towards reducing public-sector debt relative to Jamaica's gross domestic product. This is part of an overall strategy to tackle and reduce the island's massive debt burden.

Over recent months, there have been much discussion on either side of the political divide and civil society in support of the IMF's directive and Government's stated intention to relieve itself of public-sector pension contributions and, instead, making pension contributions the primary responsibility of public-sector workers.

Clearly, given Jamaica's debt burden and the need to extricate itself from this untenable situation, things cannot continue along the same path. There must be changes to the current mindset and practice.

While one can appreciate and understand the logic of Government contributing in part to the pension of public-sector employees, this should in no way relieve them of their responsibility to contribute to their own pension.

 

CURRENT INEQUITY

 

Currently, there is inequity between the private- and public-sector workers in a few areas relating to the size of contributions and pension payout upon retirement.

Generally, public-sector workers are not as well paid as their counterparts in the private sector. And this has been one of the reasons, historically advanced by successive administrations, to absorb the full costs of pension contributions for its employees.

Consequently, there is an ingrained culture of abdication of responsibility facilitated by governments and, by extension, a dependency syndrome that must be overcome.

The inequity between public- and private-sector workers must be addressed frontally and expeditiously. This massive expenditure item must be slashed from Government's budget, or at least be significantly reduced.

Having public-sector workers contribute wholly or partially to their own pension have tangible and intangible benefits.

First, it generates a paradigm shift in the mindset of public-sector workers from one of natural entitlement to creating a sense of responsibility, empowerment and ownership of their financial future.

Second, it also generates a paradigm shift in the mindset of Government to act as an effective manager and not as a benefactor to public-sector workers.

Third, it creates a level playing field for public- and private-sector workers in so far as taking responsibility for their own pension and, by extension, their financial future.

Irrespective of the views held for or against the pending change to Jamaica's pension law with respect to public-sector workers, we cannot deny the following:

1. Given the tight fiscal space and the need for the Government to reduce its debt stock, changes to the pension laws and practice are necessary and critical. Government as the sole or principal sponsor of public-sector pension is undesirable and untenable, given Jamaica's economic realities.

2. It is in the best interest of public-sector workers to assume responsibility, wholly or partially, for their own financial future. And as such they should be, at the very minimum, joint contributors to their own pension.

3. Relieving Government of making public-sector pension contributions will free up fiscal space and will result in an improvement in the competitiveness of the economy.

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